Option ARM Resets

[lamont]

Ugly looking graph:

[sniglet]

My guess is that the ARM reset/recast schedules will actually have relatively direct impact on foreclosures. Most of the foreclosures have that already been happening were due primarily to the fact that the home-owners couldn't really afford their existing mortgage payments as it was, and were unable to do any more cash-out refis (i.e. because values are depreciating) to keep the balloon inflated.

My sister in Flrorida, for example, just lost her house which she purchased in January 2007 with an option ARM. It wasn't as if she was facing any reset just yet. However, they were struggling with even their low option ARM payment and things went from bad to worse when her partner (in construction) lost his job.

I suspect we will see a lot of these option ARM holders start to go bust LONG before the resets kick in. Heck, the vast majority of option ARM borrowers were using these products with the express purpose of allowing them to try and gorge on more debt than they could really handle.

[rose-colored-coolaid]